Michael S Barr: What will artificial intelligence mean for the labor market and the economy?
Speech by Mr Michael S Barr, Member of the Board of Governors of the Federal Reserve System, at the New York Association for Business Economics, New York City, 17 February 2026.
The views expressed in this speech are those of the speaker and not the view of the BIS.
Thank you for the invitation to speak to you today. Before I get into my main topic, I wanted to share my current views on the economy and monetary policy.
Last week, we received the latest report on employment, and it provided further evidence that while the labor market slowed through last summer, it is now stabilizing. This stabilization is occurring with an unemployment rate that is broadly consistent with what many estimate is its long-run level, when the economy is in balance. That said, job creation has been near zero over the course of last year, as has labor force growth. With very low levels of job creation and also a low firing rate, there seems to be a tentative balance in labor supply and demand. But it is a delicate balance, and that means that the labor market could be especially vulnerable to negative shocks.
Turning to the other component of our mandate, inflation based on personal consumption expenditures remains elevated at 3 percent, about where it was a year ago. Disinflation, which started in mid-2022, slowed last year, as goods price inflation picked up, in large part due to tariffs. That pattern appeared to continue in the inflation data released last week. Looking ahead, it is reasonable to forecast that tariff effects on inflation will begin to abate later this year, but there are many reasons to be concerned that inflation will remain elevated. I see the risk of persistent inflation above our 2 percent target as significant, which means we need to remain vigilant.